Interim Chairwoman Elisse Walter will remain at the agency as a commissioner, but it doesn't look like she'll be there for long, David Tittsworth of IAA said.

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Just as Mary Jo White (left) was sworn in Wednesday morning as the 31st chair of the Securities and Exchange Commission, two other SEC commissioners are likely on their way out.

White, who was confirmed by the Senate on Monday, said in a statement Wednesday that it was “an honor to lead the talented and dedicated SEC staff on behalf of America’s investors and markets. Our markets are the envy of the world precisely because of the SEC’s work effectively regulating the markets, requiring comprehensive disclosure, and vigorously enforcing the securities laws.”

Elisse Walter, who was interim chairwoman after former SEC Chairwoman Mary Schapiro left in December, will remain at the agency as a commissioner, but it doesn’t look like she’ll be there for long.

While SEC spokesman John Nester says that Walter hasn’t said how long she will stay on, President Barack Obama is likely to name replacements for both Walter—a Democrat whose term expired last June—and Republican SEC Commissioner Troy Paredes, “in the coming weeks,” says David Tittsworth, executive director of the Investment Adviser Association in Washington.

Walter is able to continue serving until Congress adjourns later this year, or until another person is nominated and confirmed by the Senate. Paredes’ term expires in June 2013, and he’s indicated that he’d like to return to academia, Tittsworth notes.

An industry official who asked for anonymity told AdvisorOne that at least three people have surfaced as possbile replacements for Walter and Parades: Mike Piwowar, an economist on the Senate Banking Committee’s staff, would replace Paredes, while Kara Stein of Sen. Jack Reed’s staff or Smeeta Ramarathnam, SEC Commissioner Luis Aguilar’s chief of staff, are two possible replacements for Walter.

The “pairing” of Democrat and Republican nominees, TIttsworth says, “makes it much more likely that the nominations could move quickly in the Senate. Thus, I expect that President Obama will have to make the nominations in tandem, sometime in the coming weeks.” Prompt Senate confirmation of both nominees is also likely, Tittsworth adds.

The changing faces at the commission raise questions about the progress of the SEC’s fiduciary rule this year. While White told members of the Senate Banking Committee in March that the pending request for information regarding the costs and benefits of a fiduciary rule would be a “priority” for her, the comment period on that proposal doesn’t close until July.

Says Tittsworth: ”Typically, the agency has received many comment letters on these issues and it would be likely that it would take several months before the SEC may approve a formal rulemaking proposal (which would also be subject to written comments).”

What’s more, with the likely replacements for Walter and Paredes on board, Tittsworth says that “the issues relating to the SEC’s pending request for information and any subsequent formal rulemaking proposal will be determined by a different group of commissioners.”

Identity Theft Rules for Advisors

White got right to business, conducting the SEC’s open meeting the same day to consider whether to issue final rules to help protect investors from the risks of identity theft. The rules, required by the Dodd-Frank Act, would be issued jointly with the Commodity Futures Trading Commission.

Under the rules, which were approved, certain businesses regulated by the SEC and CFTC are required to adopt and implement programs to detect and respond to indicators of possible identity theft.

Said White in her opening remarks: “Identity theft is a type of fraud that robs millions of Americans of their hard-earned money. Current estimates are that about 5% of American adults fall victim to identity theft fraud each year. It is a risk for everyone, and as technology continues to advance, the risks increase.”

In 2007, six federal agencies jointly adopted identity theft rules under the Fair Credit Reporting Act. Those agencies were the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, the National Credit Union Administration and the Federal Trade Commission. Their rules applied to business entities that qualify as “financial institutions” or “creditors” under the Fair Credit Reporting Act and offer or maintain certain types of accounts.

However, as White explained, neither the SEC nor the CFTC adopted those identity theft rules in 2007, because the laws at that time did not authorize either of the commissions to do so. Instead, entities that the SEC and CFTC regulate such as broker-dealers and futures commission merchants were covered by the rules of the six agencies.

The Dodd-Frank Act changed this approach by transferring rulemaking and enforcement authority for identity theft rules to the SEC and CFTC for the entities we regulate.

Now that the commission adopted the rules on Wednesday, entities such as broker-dealers, investment companies, and investment advisors must comply with them.

Melanie Waddell

Melanie is Washington Bureau Chief, Investment Advisory Group. She also covers regulatory and compliance issues and writes The Playing Field column and Human Capital briefing. Reach her at mwaddell@alm.com. On twitter: @Think_MelanieW

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